Stock Repurchases and Treasury Share Sales: Do They Stabilize Price and Enhance Liquidity?

64 Pages Posted: 18 Aug 2008 Last revised: 18 Nov 2017

See all articles by Amedeo De Cesari

Amedeo De Cesari

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group

Susanne Espenlaub

University of Manchester - Manchester Business School

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance

Date Written: September 1, 2011

Abstract

Can companies reduce the volatility and increase the liquidity of their stocks by trading them? In the context of the Italian stock market, where companies have far more leeway to sell as well as buy their own stocks than in the U.S., the answer is yes. We examine the effects of trading (open market share repurchases and treasury shares sales) on liquidity (bid-ask spread) and volatility (return variance). Further, we examine the impact of shareholder approvals of repurchase programs on liquidity and volatility. We find clear evidence that trading increases liquidity and reduces volatility. These results are consistent with our analysis of the motives Italian companies give for making share repurchases.

Keywords: Repurchase, liquidity, price stabilization, bid-ask spread, variance

JEL Classification: G12, G35

Suggested Citation

De Cesari, Amedeo and Espenlaub, Susanne and Khurshed, Arif, Stock Repurchases and Treasury Share Sales: Do They Stabilize Price and Enhance Liquidity? (September 1, 2011). Journal of Corporate Finance, Vol. 17, pp. 1558-1579, 2011. Available at SSRN: https://ssrn.com/abstract=1233186

Amedeo De Cesari (Contact Author)

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group ( email )

Crawford House
Booth Street East
Manchester, M15 6PB
United Kingdom
+44 (0) 161 2754298 (Phone)

Susanne Espenlaub

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance ( email )

Crawford House
Oxford Road
Manchester, M15 6PB
United Kingdom
+44 0 161 275 4475 (Phone)
+44 0 161 275 4023 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
23
Abstract Views
1,668
PlumX Metrics